UK government launches consultation on smartphone cheque payments

The UK government has launched a consultation on proposed legislation that will allow businesses and consumers to deposit cheques via their smartphones, reducing the time it takes for cash to clear.

By enabling banks to process images of cheques rather than in their physical form it is hoped transfer and clearing time can be reduced from six days to two, and eventually make cashing a cheque faster than completing a Bacs transfer, the Treasury said.

The consultation aims to create industry standards for the use of smartphone imaging to conduct payments, and asks for feedback on changes to legislation from financial institutions, payments providers and consumer groups. The new legislation would ensure that all banks have to accept the payment method.

The consultation document highlights a number of benefits for banks aside from the cost and time required for cheque processing - with the digitisation of payments aiding fraud monitoring for example. However it notes that the industry will need to make use of "sophisticated" software to ensure that tampered-with images are not entered into the banking system.

Cheques remain a popular form of payment in the UK, accounting for transactions totalling £840 million 2012, and making up 10 percent of all payments made by individuals. It also remains a vital payment method for smaller businesses and traders.

"This government is determined to create a banking sector that works for consumers and serves businesses," Sajid Javid, financial secretary to the Treasury,

"New technology has the potential to deliver real benefits for customers. That is why we're creating a new payments regulator and why we are consulting on speeding up the cheque clearing process."

John Allan, national chairman, Federation of Small Businesses, added: "Many of our members, and their customers, still rely on cheques so will be pleased with the investment and innovation to ensure their continued use.

"Speeding up cheque payments into business accounts will help boost a firms' cash-flow as many find the current process frustratingly slow. Using smart phones is an interesting idea which should allow firms in areas, particularly where bank branches are closing, to be able to accept cheques as a method of payment."